SUMMARY OF H.R. 3009, THE ANDEAN TRADE
PROMOTION AND DRUG ERADICATION ACT

Short Title

Provides a short title for the Act, the "Andean Trade Promotion and Drug Eradication Act," bill to extend and enhance the Andean Trade Preference Act (ATPA), which expires on December 4, 2001.

Authority to Grant Duty-Free Treatment

Authorizes the President to proclaim duty-free treatment for all eligible articles from any beneficiary country in accordance with the provisions of the Andean Trade Promotion and Drug Eradication Act.

Beneficiary Countries

Authorizes the President to consider Bolivia, Ecuador, Colombia, and Peru as beneficiary countries. Designation of a country as a beneficiary country of current ATPA benefits is subject to 7 conditions, unless the President exercises national economic or security interest waiver authority. The President must also take into account 12 other factors in designating countries as beneficiaries for current ATPA benefits.

With respect to the enhanced benefits available under the new program, the President shall take into account new conditions such as: 1) whether a country has demonstrated a commitment to undertake its WTO obligations and participate in negotiations toward the completion of the Free Trade Area of the Americas; 2) the extent to which the country provides intellectual property protection consistent with or greater than that afforded under the Agreement on Trade-Related Aspects of Intellectual Property Rights; 3) the extent to which the country provides internationally recognized workers rights; 4) whether the country has implemented its commitments to eliminate the worst forms of child labor; and 5) the extent to which a country has taken steps to become a party to and implement the Inter-American Convention Against Corruption.

The President may withdraw or suspend beneficiary country status or duty-free treatment on any article if he determines the country should be barred from designation as a result of changed circumstances. The President must submit a triennial report to the Congress on the operation of the program. The report shall include any evidence that the crop eradication and crop substitution efforts of the beneficiary country are directly related to the effects of the legislation.

Eligible Articles

Applies duty-free treatment to any article eligible under the existing ATPA frame work that meets specified rule-of-origin requirements, including a minimum 35 percent Andean content (which may include content from CBI beneficiary countries, Puerto Rico and the U.S. Virgin Islands, and up to 15 percent of U.S. content). Imports of tuna, prepared or preserved in any manner, in airtight containers would receive immediate duty-free treatment.

The bill authorizes the President to proclaim duty-free treatment for any of the following articles which were previously excluded from duty-free treatment under the ATPA, if the President determines that the article is not import-sensitive in the context of imports from beneficiary countries: petroleum and petroleum products; footwear; certain watches and watch parts; certain leather products; and sugar subject to over-quota tariffs.

The President may suspend duty-free treatment in import relief or national security actions, or impose emergency relief on imports of agricultural perishable products from Andean countries within 7 days after a recommendation from the Secretary of Agriculture.

Imports of rum and textile articles subject to textile agreements would continue to be exempt from duty-free treatment.

Apparel Articles

Duty- free and quota free treatment would be accorded to: 1) apparel articles assembled or knit-to-shape and assembled in 1 or more beneficiary countries from yarns, fabrics, or components, including knit-to-shape components, wholly produced in the United States or in 1 or more beneficiary countries. (Imports of apparel made from regional fabric and regional yarn would be capped at 3% of U.S. imports growing to 6% of U.S. imports in 2006.); and 2) apparel articles that are both cut (or knit-to-shape) and sewn or otherwise assembled in one or more beneficiary countries, from fabrics or yarn not produced in the United States, to the extent that apparel articles of such fabrics or yarn would be eligible for preferential treatment, without regard to the source of the fabrics or yarn, under Annex 401 of the NAFTA (short supply provisions).

Transshipment

Provides trade benefits if the beneficiary country adopts laws and procedures to prevent illegal transshipment, including enacting laws to assist Customs' enforcement efforts and cooperating with Customs. Under a "one strike and you are out" provision, if an exporter is determined to have engaged in illegal transshipment of textile and apparel products from an Andean country, the President is required to deny all benefits under the bill to that exporter for a period of two years. Transshippers are subject to treble charges to existing textile and apparel quotas.

Reports by the International Trade Commission and the Secretary of Labor on the Impact of the Bill

Requires the U.S. International Trade Commission (ITC) to submit an annual report to the Congress on the economic impact of the bill on U.S. industries and consumers and the effect of duty-free treatment on drug-related crop eradication and crop substitution by beneficiary countries.

Requires the Secretary of Labor to make an annual report to Congress on the results of a continuing review of the impact of the bill with respect to United States labor.

Termination of Duty-Free Treatment

Terminates duty-free treatment under the Act on December 31, 2006.

Amendments to Caribbean Basin Trade Partnership Act (CBTPA) and the Africa Growth and Opportunity Act (AGOA)

• Draft regulations issued by Customs to implement P.L. 106-200 stipulate that knit-to-shape garments, because technically they do not go through the fabric stage, are not eligible for trade benefits under the act.

- Sec. 5 of H.R. 3009 amends AGOA and CBERA to clarify that preferential treatment is provided to knit-to-shape apparel articles assembled in beneficiary countries.

• With respect to apparel articles that are cut both in the United States and beneficiary countries (the so-called "hybrid cutting problem"), the draft Customs regulations deny preferential access to these garments, on the rationale that the legislation does not specifically list this variation in processing.

- Sec. 5 of H.R. 3009 adds new rules in CBTPA and AGOA to provide preferential treatment for apparel articles that are cut both in the United States and beneficiary countries.

• P.L 106-200 extends duty free and quota free benefits to apparel made in Africa from regional fabric made with regional yarn, up to a cap ranging from 1.5 to 3.5 percent over eight years. P.L. 106-200 includes within this cap duty-free and quota-free benefits for 4 years to apparel made in Africa from third country fabric by any least-developed African country (defined as a country with per capita GNP below $1500).

- Sec. 5 of H.R. 3009 would double this cap to range from 3 to 7 percent over eight years.